Key Takeaways

• Thailand as a Prime Construction Destination: With its low cost of living, ideal weather, and robust public investment, Thailand continues to attract homeowners and investors looking for cost-effective construction opportunities.
• Rising Contractor Disputes: Increased construction activity and heightened competition for reputable contractors have led to a surge in disputes, often involving delays, defects, or contractual defaults. Such conflicts underscore the need for proactive legal strategies to minimize financial strain and project disruptions.
• Evolving Legal Framework and Dispute Resolution: Construction contracts in Thailand currently fall under the “hire of works” provisions of Sections 587–607 of the Thai Civil and Commercial Code.

Construction in Thailand

With its low cost of living and ideal weather, Thailand is the ultimate destination for those looking to build a home at a fraction of the cost found in many other countries. Bolstered by economic growth and substantial public investment, Thailand’s construction sector continues to experience steady growth year on year. Mega infrastructure projects such as the Eastern Economic Corridor have also led to significant private construction.

With increasing construction activity and heightened competition for a limited supply of quality contractors, disputes with contractors continue to pose a significant challenge to both public and private entities. Contractor disputes, often arising due to delays, defects, or contractual defaults, necessitate a proactive and strategic legal approach to minimize disruption and financial loss.

What Law Governs Construction Contracts?

As of today, there is no specific legislation in Thailand that governs construction contracts. There is, however, a draft ‘Security of Payment Act’ currently being considered by the relevant authorities.

If the Act is enacted, it will aim to free up cash flow in the construction industry by introducing a “pay now, argue later” dispute resolution procedure.

For now, construction services are classified as “hire of works” under Section 587 of the Thai Civil and Commercial Code (CCC), thereby subjecting them to the provisions outlined in Sections 587–607 of the CCC. Given that construction agreements tend to be complex in nature, the general provisions of the CCC can be fairly unhelpful in resolving disputes between the parties.

Within the law, the parties are allowed to agree on the relevant terms and conditions of their contract, whether verbal or written, as long as the contract does not contradict other laws.

Can I Delay Payment to a Contractor?

Under the current law, construction contracts can include provisions allowing the project owner to withhold payment if there is a delay in completion, or to impose a delay penalty or delay liquidated damages on the contractor for non-completion of the project. Furthermore, Thai law allows for the inclusion of ‘conditional payment’ clauses within a subcontract, wherein the authorised contractor is not required to pay the subcontractors until the project owner has paid them.

What Happens When Things go Wrong?

While conventional litigation in a Thai court is the preferred method, parties to a contractual dispute can also consider alternative dispute resolution (ADR).

Common ADR methods include negotiation, mediation, and arbitration.

In drafting any construction contract, including clauses that specify dispute resolution mechanisms can provide a structured path for mediation or arbitration before disputes escalate to court.

From our extensive experience representing clients in construction disputes in Thailand, Thai courts and arbitration panels consistently stress the need for comprehensive documented evidence and a fair interpretation of contractual obligations.

Engaging proactive legal counsel and maintaining meticulous records are essential strategies for resolving disputes quickly and efficiently—thereby mitigating prolonged delays and limiting financial risks.

How Can WSR Law Help You?

With seasoned lawyers specializing in contractor disputes in Thailand, the team at WSR Law is on hand to assist you in ensuring that your construction project does not become a nightmare.

Reach out to our team today for a confidential discussion.